Why GlobalFoundries Should Appeal to Apple

Speculation that Samsung, TSMC, and GlobalFoundries could all supply Apple with its next-generation processors suggests that a wafer fab in the US and a willingness to guarantee preferential access may be key factors in negotiations.

The third piece of evidence is that GlobalFoundries is being cut loose by its owner, Advanced Technology Investment Company (ATIC), a financial vehicle of the Abu Dhabi government, with the possibility of an IPO as a means of allowing Abu Dhabi to reduce its ownership. (See Globalfoundries eyes IPO as ATIC sets expectations.)

GlobalFoundries, a relative newcomer in the foundry business, has a newly commissioned wafer fab in Saratoga County, N.Y., that has a budgeted cost of about $5 billion so far, but GloFo does not yet have the large number of clients that TSMC has. There has also been discussion about whether the likes of Apple and Qualcomm should, or would, move into chip manufacturing.

The fourth piece of evidence, from August 2012, is that TSMC rebuffed both Apple and Qualcomm when each offered more than a $1 billion to obtain a dedicated supply of processors.

One can imagine that $1 billion offered to GlobalFoundries would evoke a different response, and then Apple would not need to wait for a couple of years before being able to make claims about repatriating at least part of its manufacturing supply chain to the United States.

It is also worth mentioning that GlobalFoundries' links with IBM as part of the Common Platform Alliance means that its CMOS manufacturing process is closer to that of Samsung's than that of TSMC, making a transition of processor circuit design elements slightly easier. But to be honest, the imminent moves to FinFET construction are likely to make such things moot in the longer run.

The only thing that counts against GlobalFoundries is that, being a newcomer with a new US fab, it has yet to build up a long track record of consistent, successful execution. This is one reason Apple would not wish to have all its processor eggs in one foundry, as it does now with Samsung.

This argument would suggest that Apple should make some processors with TSMC, some with GlobalFoundries, and could even let Intel into the discussions. At the component level, Apple has always operated a buying policy of playing the field and keeping suppliers keen. I see no reason to think it will not do the same at the foundry level.

Where is evidence of US fab plan for TSMC? As I know it was media speculation based on Chang comments only that he wouldn't rule it out as a possibility. This is not like any plan. Then later he was more firm and said basically TSMC would stay concentrated in Taiwan to make best utilization benefit.

I think flashing $1 billion in front of GloFo at this juncture would be serious enough for it to give Apple a serious consideration BUT GloFo can do more outside of Apple's business. GloFo should certainly leverage its USA fab presence to its advantage while there is a trend toward more on-shoring.

While majority of the MEMS market is still dominated by players with the IDM-model, GloFo can leverage its experience with its MEMS fabs to advance the fabless model for MEMS.

There is a fourth option to consider that would also be interested in the funding: UMC.

While I agree that it makes sense for Apple to use multiple foundies, this can still be a challenge, not only because of differences in processes, but also cost. Using multiple fabs will require new mask sets for each fab, even if they are on the same or similar processes. Although Samsung and GF's processes are likley to be somewhat similar, the fab resources used by Samsung are not part of the Common Platform alliance. So, I doubt that it is the same process. Also, Apple has already invested a significant amount into having dedicated resources at Samsung.

A few other items to consider are services, IP, and IP protection. Samsung and TSMC both offer more extensive services, IP, and IP protection than the other foundries, which are all considerations. In other words, switching from one fab to another is not like going to a grocery store across the street. It is a major engineering effort with a significant cost. As a result, any change takes time. In the end, I would expect to see two of the foundries, not more, manufacturing for Apple, and even then, they may be manufacturing different products.